Fashion fundamentals

Banana Republic Returns To Fashion ‘Fundamentals’ After Its Home-Centric CEO Exits

News just broke that Banana Republic’s president and CEO Sandra Stangl has been shown the door. While a company spokesperson replied “No comment” to my request, WWD obtained an internal memo from Gap Inc. CEO Richard Dickson stating: “As we close out the first quarter of the year, Sandra and I have agreed to transition to new leadership for Banana Republic.”

He added, “Each of our brands are focused on fixing the fundamentals to drive both relevance and revenue. Sandra and the teams have begun to lay the foundation to reestablish the brand to thrive in the premium lifestyle space. And I look forward to identifying a new leader to take Banana Republic to the next level.”

Fixing the fundamentals is just what the next leader at Banana Republic must do because Stangl thoroughly messed them up by taking the fashion brand that was already in trouble and expanding into the home furnishings category.

Relevance and revenues suffered as the brand took its eyes off the prize and ventured far from its mandate in fashion into the home category where it had no authority and faced well-established competition.

Disappointing Earnings Report

In the latest earnings report in March, the company reported fiscal 2023 revenues declined 5% to $14.9 billion and Banana Republic’s were off 8% to $1.9 billion.

Dickson advised the path forward for Banana Republic is to go “back to basics” with a focus on “go-to wardrobe pieces and BR classics like sweaters, oxfords, suit separates, and khakis, those products that Banana Republic has been known for and will be again.“

He made no mention of the brand’s misstep into home and that’s a good sign. While he cautioned reestablishing Banana Republic will take time, Dickson doubled down on the need to “better execute many of the fundamentals in 2024.”

Fundamentally, Banana Republic is a fashion brand and that’s the fundamental that Gap Inc. needs to reestablish.

Missing The Mark

Banana Republic’s heyday was in 2014 when sales reached nearly $3 billion. By pre-pandemic 2019, it had fallen back to around $2.5 billion, then got hit with the pandemic and dropped to $1.5 billion in 2020.

Stangl joined the company in late 2020, having worked throughout her career in the home furnishings sector, including 23 years at Williams Sonoma. Her initial results showed promise with Banana Republic revenues reaching $2 billion in 2021 and then advancing $2.1 billion in 2022.

Yet in 2023, after the highly publicized launch of the BR Home Collection, where she and her team were obviously spending the bulk of their time, revenues took a dive to $1.9 billion.

In hindsight, Stangl can’t take much credit for Banana Republic’s two-year post-pandemic recovery. Rather, it gives her a black eye when compared against the industry’s performance overall.

Clothing and fashion accessory retail store sales rose 7.5% between 2021 and 2023, from $290.7 billion to $312.5 billion in 2023. Banana Republic completely missed that rising tide.

Correcting Mistakes

To Dickson’s credit, he learned pretty quickly that Stangl wasn’t the leader to move Banana Republic’s fundamentals forward. She was hell-bent on making home the cornerstone of the brand’s lifestyle strategy.

“Our expanded Home collection is central to our vision to be the premier lifestyle brand that positions BR as an experiential and cultural cornerstone in our customers’ lives,” she said when introducing its first foray into soft home furnishings in March 2023, with furniture under the BR Home banner following in September, now featured in 19 Banana Republic stores.

Banana Republic’s chief brand officer Ana Andjelic, one of Stangl’s first hires, saw the writing on the wall and left the company after less than two years, exiting to Esprit in late 2022.

Andjelic has an impeccable track record as a brand strategist, named three times to the Forbes Top CMO list, most recently for her work with Esprit. Her professional experience was grounded in fashion, including time with Mansur Gavriel, Rebecca Minkoff and executive brand consultant for David Yurman.

Andjelic was the perfect choice to reestablish the brand’s fashion credentials, and one can imagine she was frustrated by Stangl falling victim to Maslow’s Hammer syndrome: “If the only tool you have is a hammer, you tend to see every problem as a nail.”

Home In Purgatory

At this juncture Banana Republic is probably too far into the home category to make a fast exit. Earlier this year with speculation swirling that BR Home Collection was on the rocks, a spokesperson told WWD that the company was committed to the home collection and firmly denied the line would be discontinued.

My guess is home will be retired to the sidelines with hopes it can sell off some of its existing inventory, along with additional bedding, dining and bath products it’s got on order, while Dickson searches for a Banana Republic leader who can restore the brand’s fashion fundamentals.

Some home furnishings, like bedding, pillows and throws, might make sense in the long run, but much of the rest is a distraction the brand certainly doesn’t need right now or possibly ever.

Meanwhile, Dickson has an ace in the hole that he might deploy for Banana Republic’s revival: celebrated fashion designer Zac Posen.

Posen joined the company in February to turn around the Old Navy brand, the biggest in its portfolio, generating $8.2 billion of company sales in 2023. But in addition to being chief creative officer of Old Navy, Posen is also executive vice president, creative director of Gap Inc.

Posen’s creative eye and established authority in the luxury market might prove especially valuable to elevating the standing of the company’s premium, near-luxury Banana Republic brand.

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